C&W crumbles on bonds blow

SHARES in Cable & Wireless fell sharply after the troubled telecoms group raised £258m in a bond issue that threatens to dilute ordinary shareholders.

More than 166m shares changed hands as investors shorted the ordinary shares and bought the new convertibles in a classic hedge fund play. The shares dropped 6 1/4p to 98 1/4p, making C&W the biggest FTSE 100 faller, but they are still strongly ahead of of the 41p low of late last year.

The company said it would use the cash to strengthen the balance sheet and increase financial flexibility. It was not needed for the restructuring announced earlier this month, C& W said.

That cash, plus the bond issue proceeds, will add to C&W's cash pile, recently put at £1.6bn. C&W will have repaid £600m of debt by the end of the year.

The bonds, with a coupon of 4%, are convertible at 145p into 177m ordinary shares, equivalent to 7 1/2% of the share capital. They mature in 2010. Adviser JP Morgan said the bonds were 'comfortably subscribed' today. Fees amounted to £6.2m.

C&W has racked up losses of £11.5bn over the past two years in the wake of its doomed attempt to build a global internet business for the world's multinationals.